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How to forecast your business finance

When owning and operating a small or large business, forecasting your finances is a must.Everyone knows that making money is the most important part of keeping your business a float, and to make money, you need to know how much is coming in and how much is going out.The amount collected minus the amount paid out, is your net profit.To be a success, you have to have an estimate of what this amount is going to be every month.To help you get an estimate you will need to track your sales, expenses, and prepare for differences in your estimates.

To track your sales, you will need to first start with regular customers.If you have recurring items that certain customers buy each month, then when doing your forecasting you can count them as a regular sale.As for forecasting future sales, you should try and use the past.If you know how you did last June, you can make a guesstimate of how you will do this June.Or, if you are not comfortable with doing it that way, you can take a monthly average.Take a quarter and average out your sales and use that as your forecasting tool.

Tracking your expenses is probably a little easier.Everyone has rent to pay, electric and/or gas bills, and your basic phone, water and garbage utilities.Most creditors that you owe will be the same amount each month, with the same due date. If you have an employee payroll, it should be a pretty steady amount each month, unless you have high employee turn around.If that is the case, then better to plan for the higher amount you pay out. Other expenses you may have, you can add up a few months and try and take the average.

Surprise expenses are very important to plan into your forecast.Everything from having to hire an extra employee to some kind of machinery breaking can pop up at a moments notice.You need to leave yourself a percentage of money every month to allocate for these incidents.The best way to do this, if your money is kind of tight, is to take some of your money from sales and just put it right over to your expense column.This way it is saved and just thought of as money for expenses.

If you have problems trying to forecast your own finances, there are a lot of different financial software programs out there that can help you.Some are so easy, that all you have to do is plug in your numbers and your forecasting is done.If software isn't the way to go for you, you can always hire an accountant to put you on the right track.Once you're initial forecasting is done for you, you should be able to continue on with it by yourself in future quarters or years.

No matter how you go about getting it done, financial forecasting is an extremely important part of running a successful business.You have to keep track of your monies comings and goings, to make sure you are making a profit.The best way to make sure that this is going to happen is to plan for and forecast your future.Taking the time and making the effort now to do this forecasting, will save you a lot of time and stress that can arise with surprises in owning a business.Surprises can be good in life, but when it comes to running and maintaining a successful business, it is better to be prepared and know that sunny skies are in the forecast.

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